Bad Books at Microsoft 45
An Anonymous Coward wrote in with a fascinating story about
Microsoft allegedly defrauding its stockholders and the SEC, and
firing a superb-by-their-own-admission auditor. It'll be interesting to see how this
ends. Of course, Microsoft denying any wrong doing is the short version.
Update: 01/23 10:21 by S :
Link Moved.
Generally Accepted Accounting Practices Fault (Score:1)
"Your company has caused a Generally Accepted Accounting Practices Fault (GAAPF) and will be terminated"
TROLLS TAKE NOTICE! MS BASHING HERE! V (Score:1)
Microsoft stock in trouble anyway (Score:1)
When MS stock starts to slack, watch out.
Better than ZDNet's version... (Score:1)
Then again, I'm not surprised to see this kind of allegation come out against Microsoft, and I'm even less surprised to see ZDNet jump to their defense.
ms's first witness in the doj trial (Score:1)
otherwise it's not a competition at all!
the DOJ are punishing microsoft for being too successful, and the behest of jealous, incompetent competitors. It's the natural law of the jungle - win or die.
try to read this without bigotry:
http://microsoft.aynrand.org/
Seen today's User Friendly? (Score:1)
I'm breaking rule #2 right now.
-----
not true (Score:1)
Um...no (Score:1)
No...Microsoft is going to really hurt from this if there's anything to it.
Mondo bad news for Microsoft, if it's true... (Score:1)
If Whitewater was so bad... (Score:1)
Yeah and the more they tax us, the bigger their surplus, the better everyone thinks of the gov't. Silly, ain't it?
--
Aaron Gaudio
"The fool finds ignorance all around him.
what a bunch of dummies (Score:1)
They hire a partner from Deloitte, assign him to internal audit, give him stellar reviews, then show him the door when he notices the (supposedly) illegal activities. Sheesh. Do they think they can hide this activity from an internal auditor (especially a former partner of big 6)?
Fortunately the SEC does not take this behavior lightly. Can't wait to see the results.
Re:Missing one point (Score:1)
I guess the point is that such activities violate securities laws. Revenue is exactly what was tampered with. By creating reserves and later reversing them they gave a false impression of a steady revenue stream.
The SEC is not tolerant of activities that attempt to artificially modify a company's own stock price.
It would be great.. (Score:1)
If MS is going to get hurt, I would much rather see it be because of this then the DOJ.
Elwood.
hmmm (Score:1)
MicroSoft, stock manipulation and RICO law suits (Score:1)
I've been saying for years that the only real way of stopping MicroSoft is a RICO. The DOJ's anti-trust cases will slow them down but never stop them.
RICO's are beautiful beasts. All you have to do is show a pattern of criminal behavour, you dont have to prove any of the individual charges. And one of the three activities that triggers a RICO is manipulating stock prices. That's how they got the junk bond king Michal Milliken. One year in the mid-80's he was paying himself $550M, three years later he was in jail. If Michael Milliken can go to jail then so can Bill Gates. Gates has more enemies, and more powerful enemies, than Milliken ever had. And MicroSofts pattern of criminal behavour of the last 20 years is very well documented.
It will be a few years before some Federal DA with political asperations launches a RICO attack on MicroSoft (whatever happened to that DA guy Guilliani who brough the case against Milliken...), but when they do, the fur will really start flying. Dont be to suprised if Gates flees the country to his $10M+ house in London.
I think its time to start a MicroSoft RICO Watch web site..
because there doing just that :) (Score:1)
because there keeping there mouth shut.
and it has happened before.
just no one seems to care all that much about it
It is common practice, but not acceptable (Score:1)
And don't expect an external accounting firm to find discrepancies during an audit. They aren't hired to work that way. If BCCI (the Bank of Crooks and Criminals International) could undergo audits from one of the Big 5 and come out clean until a post-mortem, I'm sure that Microsoft could as well.
Common practice, I'm afraid (Score:1)
While I am no fan of Microsoft, this kind of accounting procedure is commonplace, because Wall Street insists that revenue targets be met exactly. This means that most companies do some version of this "cookie jar" trick: move money around from quarter to quarter, build a backlog, recognize revenue earlier or later, all so you get a nice smooth exponential growth curve.
Some forms of this are legal, and some forms aren't so legal. But if Microsoft gets prosecuted for this, then I'm afraid half of Silicon Valley is next.
The argument that this defrauds the stockholder is questionable, because the stock price goes down if this is not done. So maybe you're hurting your stockholders if you don't play as many accounting games as possible. Who knows? The stock market is a fantasy in any case.
The wrongful termination of the auditor is another matter.
Bubbles (Score:1)
The Asian economy suffers today due to stockholder blindly balloning the stock price e.g. The stock vs total Assets ratio is up to 10:1 even 15:1. It is not suprise that a currency attack effectively brings Asian country into turmoil.
Big surprise... (Score:1)
Bill Gates has to be frightened out of his wits now that it's possible that stock prices might deflate and that he may lose his place as the world's richest man...
Other Creative Accounting Cases (Score:1)
I seem to recall Oracle having some BIG problems in this regard somewhere in the late 80's or very early 90's. They tried cooking the books in regard to their sales numbers (the way they credited sales to quarterly results, or some such). They got into BIG trouble for it and, as I recall, were forced to restate their sales (and profit) numbers for several previous quarters.
Needless to say, it turned out they were NOT the 500 lb gorilla business wise that they appeared to be prior to that. Their stock took a major dive, and they had to recover from the debacle to beat out the DB competition that they had.
You can take 2 lessons from that; yes, if proven, the company will take a hit. And there's no guarantee that it will be a long term or fatal hit for a company the size of Mickeysludge.
Is thsi wrong? (Score:1)
Look at it this way: Who is hurt by it? Certainly the stockholders aren't hurt: their stock price is ultimately going to be the same, only this way there is less volatility. The only person I could see benfitting undfairly from this is insider traders, who have the real profit numbers and use them to make a profit on the stock market.
In any event, this is something that can be handled within Microsoft. If shareholders really don't like it, they can get Bill fired. I suspect, however, that they are happy with the job he's doing, cooked books or no.
One quarter was a loss? (Score:1)
He is paid (Score:1)
"We'll pay you..um..$1 million an hour for your time."
"Well...OK"
Tell us more! OK (Score:1)
I believe they report this in their annual report and quarterly reports.
How long has it been going on?
Since Microsoft has existed. Basically, instead of paying people actual cash, which decreases their earnings, they pay a little cash plus stock options. This may be the whole point of the charade. To get employees to go along with this, they need the constantly increasing stock price. If they report a bad quarter, the stock goes down, it becomes harder to recruit slaves, I mean employees...
Don't get your hopes up... (Score:1)
Widely held view... (Score:2)
"Microsoft is just making more money than they can hide.
I've been on the record for a couple of years now, claiming that MS has so
much cash socked away that they can produce any financial results they want
to quarter by quarter.
Picture a bunch of shoe boxes in the back of Billg's office -- no, that's
too small. Picture a bunch of dumpsters in the basement of Building 8 on
the MS Redmond campus, all of them brand new and lined up, numbered, and
locked. Inside, picture compact stacks of thousand-dollar bills, each
dumpster filled to the very top, and the whole basement full of these, with
just a small maze-like walkway space left, just wide enough to get a small
handcart to any or all of these little green private banks.
You'll notice that Billg announced an increase in R and D expenditures last
week, from $2.9B to $4.9B or so. Big hit to earnings, right? You see,
they have run out of space in Building 8's basement ---
Of course, I am only half kidding.
It is really hard to hide that much money."
His comments were of course not issued in the context of the GAAP/SEC violations, but his views have become widely held in the industry.
Now we get to sit back and watch the circus come to town (or perhaps leave town if the allegations are un-provable)